Construction Industry Payment and Adjudication Act and Regulations (Act 746)

Construction Industry Payment and Adjudication Act and Regulations (Act 746)

The Construction Industry Payment and Adjudication Act 2012 (Act 746), also referred to as CIPAA, is a Malaysian law enacted to resolve payment disputes in the construction industry and to promote healthy cash flow among industry players. Effective from 15 April 2014, the Act applies to written construction contracts for work performed wholly or partly in Malaysia, including professional consultancy services such as those provided by architects, engineers, and quantity surveyors. It establishes a statutory adjudication framework that enables parties to obtain prompt payment through a clear and time-sensitive procedure. Under the Act, an unpaid party may issue a payment claim, to which the responding party must reply within the prescribed period; failure to respond may impact the adjudication outcome. In the event of a dispute, either party may refer the matter to adjudication, which is generally administered by the Asian International Arbitration Centre (AIAC). The adjudicator is required to render a decision within a specified timeframe, typically 45 working days, and such decision remains binding unless it is set aside by the court or conclusively resolved through arbitration or litigation. Reflecting the principle of “pay now, argue later,” the Act prioritizes immediate payment while preserving the parties’ right to pursue further legal remedies. It also provides relief mechanisms such as the suspension or reduction of work, direct payment by the principal, and enforcement of the adjudication decision as though it were a judgment of the High Court. The accompanying Construction Industry Payment and Adjudication Regulations 2014 further outline the procedural requirements, fee arrangements, and administrative framework necessary for the effective operation of the Act.